Differential Effects of Food Security Policies on
Subsistence Farmers and the Urban Poor
Mario J. Miranda
Don F. Larson
Katie Farrin
The Ohio State University and The World Bank
Half-Baked Seminar, World Bank
April 19, 2012
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Introduction
High, volatile food prices in recent years have
... heightened food security concerns
... led to export restrictions among food exporters
... revived interest among food importers in buffer stock programs
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Wish to extend World Bank research to compare implications of:
buffer stock reserves (rural and urban)
temporary export bans
domestic transportation infrastructure enhancements
port infrastructure enhancements
agricultural index insurance
direct cash transfers
Specific interest in effects on rural v. urban poor.
Specific interest in effects on exporting v. importing countries.
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Model
Stylized dynamic heterogeneous agent model of developing country.
Country exposed to food production and world food price risk.
Country divided into a rural “interior” and urban “port”.
Country includes poor, food-insecure rural “farmers”.
Country includes poor, food-insecure urban “laborers”.
Food-insecure subsist on staple food commodity “grain”.
Suffer “malnutrition” if resources cannot meet grain needs.
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Markets
Groups
Poor Farmers
Interior
Commercial Farmers
Rural Non−Poor Consumers
Out−Shipments
In−Shipments
Poor Laborers
Port
Imports
Urban Non−Poor Consumers
Exports
World
Figure : Flow of Grain Among Markets, Producers, and Consumers.
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Rural Interior
Inhabited by poor farmers, commercial farmers, non-poor consumers.
Typical poor farmer must consume q ∗ to be well-nourished.
Farmer begins with pre-determined production and savings.
If on-farm grain production exceeds needs, farmer sells surplus.
If production falls short, farmer uses savings to purchase grain.
Farmer malnourished if production+savings cannot meet requirement.
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Poor farmers experience distinct, idiosyncratic production shocks.
Number of farmers large, idiosyncratic shocks fully diversifiable.
Aggregate demand for grain among poor farmers depends on rural
price, distribution of production and savings.
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Price
q∗
Typical
Low Production
No Savings
Quantity Demanded
Figure : Poor Farmer Per-Capita Demand
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Typical
Low Production
No Savings
Malnutrition Rate
1
0
Price
Figure : Local Price and Poor Farmer Malnutrition
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Urban Port
Inhabited by food-insecure laborers and food-secure consumers.
Typical laborer must consume q ∗ to be well-nourished.
Laborer begins with pre-determined income and savings.
Laborer uses income and savings to purchase grain.
Laborer malnourished if income+savings cannot meet requirement.
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Poor laborers experience distinct, idiosyncratic income shocks.
Number of laborers large, idiosyncratic shocks fully diversifiable.
Aggregate demand for grain among poor laborers depends on urban
price, distribution of income and savings.
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Price
q∗
High Income/Savings
Low Income/Savings
Quantity Demanded
Figure : Poor Laborer Per-Capita Demand
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Malnutrition Rate
1
High Income/Savings
Low Income/Savings
0
Price
Figure : Local Price and Poor Laborer Malnutrition
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Market Equilibrium
Urban port linked to rural interior and world markets via a
capacitated transportation network with fixed unit costs.
Equilibrium requires absence of spatial arbitrage profit opportunities
and material balance.
Framework allows us to examine
enhancement of domestic transportation infrastructure
expansion of port facilities
import and export tariffs and quotas.
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1
Farmers
Laborers
0.9
0.8
Rate
0.7
0.6
0.5
0.4
0.3
0.2
150
160
170
180
190
200
210
Domestic Production
220
230
240
250
Figure : Effects of Aggregate Domestic Grain Production on Malnutrition
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1
Farmers
Laborers
0.9
0.8
0.7
Rate
0.6
0.5
0.4
0.3
0.2
0.1
0
0.5
0.6
0.7
0.8
0.9
1
World Price
1.1
1.2
1.3
1.4
1.5
Figure : Effects of World Grain Price on Malnutrition
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1
Farmers
Laborers
0.9
0.8
0.7
Rate
0.6
0.5
0.4
0.3
0.2
0.1
0
0.5
1
1.5
Poor Urban Laborer Per−Capita Income
2
Figure : Effects of Per-Capita Urban Laborer Income on Malnutrition
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Direct Cash Aid Policy
Direct cash aid to poor when access to grain drops below target level.
Government cannot differentiate among individuals, same aid to all.
Access defined as amount of grain typical poor person can purchase
at prevailing prices.
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0.35
Farmers
Laborers
0.3
0.25
Amount
0.2
0.15
0.1
0.05
0
0.5
0.6
0.7
0.8
0.9
1
World Price
1.1
1.2
1.3
1.4
1.5
Figure : Effects of World Grain Price on Financial Aid
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0.18
Farmers
Laborers
0.16
0.14
Amount
0.12
0.1
0.08
0.06
0.04
0.02
0
150
160
170
180
190
200
210
Domestic Production
220
230
240
250
Figure : Effects of Domestic Grain Production on Financial Aid
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0.25
Farmers
Laborers
0.2
Amount
0.15
0.1
0.05
0
0.5
1
1.5
Poor Urban Laborer Per−Capita Income
2
Figure : Effects of Urban Laborer Income on Financial Aid
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In-Kind Food Aid Policy
In-kind food aid from buffer stock to poor when access to grain drops
below target level.
Government cannot differentiate among individuals, same aid to all.
Access defined as amount of grain typical poor person can purchase
at prevailing prices.
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0.25
Farmers
Laborers
Quantity of Grain
0.2
0.15
0.1
0.05
0
0.5
0.6
0.7
0.8
0.9
1
World Price
1.1
1.2
1.3
1.4
1.5
Figure : Effects of World Grain Price on Food Aid
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0.16
Farmers
Laborers
0.14
0.12
Quantity of Grain
0.1
0.08
0.06
0.04
0.02
0
150
160
170
180
190
200
210
Domestic Production
220
230
240
250
Figure : Effects of Domestic Grain Production on Food Aid
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0.35
Farmers
Laborers
0.3
Quantity of Grain
0.25
0.2
0.15
0.1
0.05
0
0.5
1
1.5
Poor Urban Laborer Per−Capita Income
2
Figure : Effects of Urban Laborer Income on Food Aid
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Next Steps
Focus on effects of policy on malnutrition in urban and rural poor.
Parameterize model to fit specific case (MENA, Senegal, Ghana?).
Draw empirical implications and put model to empirical tests.
OSU Research Working Group on International Food Security.
Analysis of food-security policies proposed in response to the Crisis.
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Research Portfolio - Trade and Storage Policies
Market insulation through export bans, other trade measures
Unilateral and multilateral buffer stock programs
Emergency preparedness and response
Differential effects on urban and rural poor
Virtual food reserves
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Research Portfolio - Modelling Frames
Stochastic spatial-temporal equilibrium models
Equilibrium models with time lags
Dynamic game models of limited commitment
Structural dynamic models of price contagion
Structural dynamic models of price integration
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Research Portfolio - Regions of Interest
Middle East and North Africa
West Africa - ECOWAS, MENA
Southeast Asia - ASEAN
China
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